What happened

Shares of cloud communications company Bandwidth (BAND 0.14%) blazed 41.5% higher on Monday, as of 10:15 a.m. ET, after "beating earnings" by a factor of nine last night.

Heading into Q3 earnings, analysts had forecast Bandwidth would earn only $0.03 per share (pro forma) on sales of $140.9 million. In fact, Bandwidth earned $0.27 per share, and sales came in at $148 million.  

So what

Now, the news wasn't entirely good. Sales actually grew only about 13% year over year, which isn't bad, but isn't super. And gross profit margins on those sales actually declined about one percentage point to 43%. (At least, when calculated according to generally accepted accounting principles (GAAP), they declined. Pro forma gross margins improved by 300 basis points).  

Speaking of which, Bandwidth's $0.27 per-share profit was also pro forma. When calculated under GAAP accounting standards, Bandwidth actually lost about $0.03 per share -- but even so, this was a lot better than the $0.28 per share the company lost under GAAP standards in Q3 last year.

Basically, any way you look at the numbers, Bandwidth showed significant improvement.

Now what

And Bandwidth intends to keep on improving. Updating guidance based on its most recent performance, the company now anticipates collecting between $146 million and $148 million in sales for Q4 and earning a pro forma profit of from $0.03 to $0.05 per share. For the full year, that will therefore give Bandwidth sales of $562 million to $564 million and pro forma profits of $0.35 to $0.37 per share. That's significantly more revenue and profit than Wall Street has been anticipating, and helps to explain investor excitement for the stock today.

It also implies 16% sales growth in the year's final quarter (so even better growth than Bandwidth produced in Q3). The bad news is that Bandwidth still isn't promising real GAAP profitability even in Q4 -- and most analysts don't see Bandwidth turning profitable before 2025 at the earliest.  

Given the uncertainty, if I were a Bandwidth shareholder today -- and suddenly gifted a windfall 40% profit on another money-losing quarter -- I think I'd take the money and run.